Advanced Energy Perspectives

UK RIIO Sets Out to Demonstrate How a Performance-Based Regulatory Model Can Deliver Value

Posted by Coley Girouard

Jun 6, 2019 11:00:00 AM

RIIO case study-500

This case study, originally published by Utility Dive, is the final installment in a six-part series on utility business model reform produced by Rocky Mountain Institute, America's Power Plan, and Advanced Energy Economy Institute.

In the United States, the traditional utility business model has served us well for many years, but it is increasingly out of step with a new set of market conditions — aging infrastructure, advances in technology and flat-to-declining load growth driven by rising deployment of energy efficiency, demand response and other distributed energy resources. Traditional cost-of-service regulation favors utility capital investment in long-lived assets rather than rewarding utilities for their performance against desired policy objectives and it discourages utilities from taking advantage of the general shift in the economy to service-based solutions provided by third parties. A decade ago, the United Kingdom's Office of Gas and Electricity Markets, known as Ofgem, set out on a mission to develop a new regulatory framework that would reward utilities for innovation and for meeting the changing expectations of consumers and society. The culmination of that process was the development of a framework referred to as RIIO.

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Topics: 21st Century Electricity System, Regulation

Making Cloud Computing and Other Services Pay for Utilities and Customers

Posted by Coley Girouard

Apr 17, 2019 12:45:17 PM

CLOUDCOMPUTING IMAGE - 500

This is the fifth in a six-part series on utility business model reform provided by Rocky Mountain Institute, America's Power Plan, and Advanced Energy Economy Institute, originally published by Utility Dive.

Technologies are quickly advancing, providing a wide array of industries from transportation to healthcare to financial services with tools to modernize their products and services, while utility regulation has struggled to keep up. A key stumbling block is that many solutions are only offered as services rather than capital investments that a utility owns and operates. Utilities earn a rate of return on capital equipment, such as poles, wires, transformers and on-premise IT systems. By contrast, operating expenses, such as salaries, maintenance and payments for services, come out of a limited budget, so utilities manage these expenses to avoid overspending and eroding their earnings. The net effect is a significant disincentive for utilities to procure service-based solutions provided by private advanced energy companies. This limits utilities from taking advantage of many new technologies that are solely offered through service contracts, such as cloud computing, since these services displace an earnings opportunity.

In order to encourage utilities to make IT investments that are in the best interests of both them and their customers, two states — New York and Illinois — have looked at changes in how cloud services are treated for accounting purposes. These accounting innovations could potentially be applied to other utility needs that could be met more cheaply or flexibly as services than as capital assets.

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Topics: 21st Century Electricity System, Regulation

Behavioral Demand Response Gives Baltimore Gas and Electric a Business Reason to Reduce Peak Usage

Posted by Coley Girouard

Feb 6, 2019 12:48:38 PM

Case Studies in Utilitity Business Model - BGE-500

This is the second in a six-part series on utility business model reform provided by Rocky Mountain Institute, America's Power Plan, and Advanced Energy Economy Institute, originally published by Utility Dive.

At most times of the year, much of the electricity generating capacity in the United States stands idle. That's because the electric power system is built to handle demand at its peak — those few sweltering summer days when everyone's AC is running full blast. What utilities pay for power at those times of peak demand drives up the price we pay for electricity. In fact, approximately 10% of infrastructure investments in the United States focus on serving demand in just 1% of hours of the year. This leads to the question: are there more efficient ways to manage this demand — and make it in utilities' business interest to implement them?

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Topics: 21st Century Electricity System, Regulation

What do Hawaii and Pennsylvania (and Several Other States) Have in Common? They’re Charting a Course Toward Utility Regulatory Reform.

Posted by Ryan Katofsky

Jan 30, 2019 3:00:00 PM

Utility Regulatory Reform-730

As we have written many times in the past, the electric power sector is in the midst of some big changes. Whether it is new wind and solar power beating existing coal generation on price, the rise of electric and autonomous vehicles, or the multiple factors behind the evolving utility business model, change is in the air, and those changes are being driven in large part by technology and customer preferences. So it is not a question of if, but when change occurs, and it is also possible to imagine what the end state is going to look like, even if the timing and many of the details remain unknown. Uncertain, as well, is the path to that end state. But states ranging from Pennsylvania to Hawaii are blazing the trail, each in their own way.

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Topics: 21st Century Electricity System, Regulation

Top 10 Utility Regulation Trends of 2018

Posted by Coley Girouard

Dec 19, 2018 4:52:37 PM

powerlines-sunset-Tom-Burke-cropped-730

Photo by Tom Burke, used under a Creative Commons license

In July, we published a list of the top 10 utility regulation trends of 2018 – so far. With 2018 winding down, we check in on the top public utility commission (PUC) actions and trends of the year. Ten prominent trends and actions stand out above the rest, from renewables continuing their downward price trajectory, to electric vehicle charging infrastructure build-outs getting approved, to exploration of utility business model reforms and non-wires alternatives to traditional distribution investments. Here is the full round-up of the top 10 matters before PUCs in 2018.

Note: some links in this post reference documents in AEE's software platform, PowerSuite. Click here and sign up for a free trial.

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Topics: PUCs, 21st Century Electricity System, Advanced Transportation

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